Utility Costs at One of Hambley Corporation's Factories Are Listed

question 40

Essay

Utility costs at one of Hambley Corporation's factories are listed below: Management believes that utility cost is a mixed cost that depends on machine-hours.
Required:
Estimate the variable cost per machine-hour and the fixed cost per month using the high-low method.Show your work!

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Definitions:

Variable Cost

A cost that varies with the level of output or activity, such as materials and labor costs.

Operating Leverage

A financial ratio that measures the degree to which a firm or project can increase operating income by increasing revenue.

Operating Income

The income earned from a company's day-to-day operations, calculated before taking into account interest and taxes.

Margin Of Safety

The difference between actual sales and break-even sales, providing a cushion against which sales can fall before a business incurs a loss.